Regulatory Developments Immigration policies in Japan have yet to enable efficient cost-effective transfer and employment of foreign staff. For Japanese companies and foreign-owned businesses relying to a significant extent on foreign expertise, the full mobility of foreign labour in and out of the country is crucial to their success. Japan is the only advanced industrial nation to regulate the movement of foreign residents through a dual visa and re-entry permit system. In addition to a standard visa system, the Immigration Bureau under the Ministry of Justice, administers a unique re-entry permit system that requires all foreign residents, including permanent residents, to acquire special permission if they wish to leave the country without losing their residency status. In 1999, a revision of the Immigration Control and Refugee Recognition Act enabled an extension of the maximum period during which re-entry is permitted, from one year to three years. The revision made it easier for foreign residents to enter and leave Japan, but only after a multiple re-entry permit has been obtained and as long as the visa remains valid. Restrictions on work permits also pose a challenge for businesses to employ foreign staff. Under the current system, work visas for special skilled workers that do not have a university degree are only granted if proof of ten years' work experience is demonstrated. Recent revisions to labour laws have been successful in granting employers greater discretion in terms of working hours, compensation, pension schemes and contracts, but continue to support the long-term employment system. The Labour Standard Law was amended in June 2003 to permit employee dismissals only if the employer met stringent criteria for economic hardship. This amendment did not set out specific criteria for what would be considered reasonable compensation for severance. Japan's Defined Contribution Pension Law of 2001 enabled employers to offer more flexible and attractive pension schemes to employees, however, there are yet to be amendments that would enable expanding refunds of mandatory Japanese pension fund contributions for expatriate workers leaving Japan. Refunds for pension payments are covered by social security agreements currently in the process of being concluded with Belgium, France, the UK and Germany. A comprehensive economic integration agreement between the EU and Japan would have to streamline the process of brokering multiple individual agreements on social security pension reimbursement. Prospects for EU-Japan Economic Integration Economic globalisation and current demographic trends in Japan including an acute shortage of skilled labour, an ageing population, and a declining birth rate present significant challenges for domestic and foreign-owned businesses and the long-term vitality of the Japanese economy. Companies are forced to streamline their management, improve working conditions, enhance operational efficiency and find new sources of labour from abroad. In light of these challenges, it is critical that labour regulations and human resource management practices facilitate international commercial transactions and provide the best means of acquiring and retaining a high-skilled competitive workforce. In order to meet the evolving demands of today's fast-paced global economy, the Government of Japan must deregulate obstructive regulations on immigration, pension schemes, and employment tenure in line with international standards and practices. Priorities
■ Immigration: re- entry permits and work permits Yearly status report: limited progress. The Council for Regulatory Reform of Japan has recommended that the re-entry permit system be reformed before the end of fiscal year 2007. The process for applying and renewing such permits remains bureaucratic and time-consuming, with cost implications for both applicants and employers. Furthermore a re-entry permit does not appear to provide additional measures for controlling immigration. Foreigners possessing a visa have already been screened and found eligible to stay in the country. Immigration officials are able to monitor exit and entry of foreigners through their visa, which can be cancelled at any time should the holder be found to engage in activities other than those permitted under the terms of the visa. Restrictions on work permits also pose a challenge for businesses and companies that seek to employ foreigners with a specialized skill set. Currently, young professionals (with no university degree) applying for a visa are required to prove their "special skills" on the basis of a proven record of 10 years' professional experience. Recommendation:
■ Pensions Yearly status report: limited progress. Social security agreements are being negotiated or have been concluded with Belgium, France, the UK and Germany, as well as the US and South Korea, but refunds of mandatory contributions to Japanese pension plans remain capped at a maximum of three years, approximately 1.5 million yen in the case of departing expatriates. Recommendation:
■ Dismissals of employees Yearly status report: limited progress. Although the revision to the Labour Law permitted employee dismissals, it did not address the issue of severance payments, an area where standard practice urgently needs to be codified in law in order to avoid uncertainties and the risk of unnecessarily costly settlements. For operational efficiency and to maintain high standard working conditions for employees, companies need a clear mandate on the hiring and dismissing of employees. Recommendation:
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